hello, welcome to the regular meeting of the budget and finance meeting. i'm carmen which you, chair, joined by supervisor avalos, joined by supervisor kim shortly and scott wiener *. our clerk is alicia. we have scetv group with us. madam clerk, do you have announcements for us. >> make sure to silence devices and include speaker cards to be submitted to the clerk. items will appear on the october 2nd board of supervisors agenda unless otherwise stated. >> thank you. call item one. >> item one is resolution approving contract with new

flier of america for low floor diesel hybrid buses not to exceed 36,889,364. >> thank you. supervisor wiener? >> thank you, madam chair. i'm proud to be sponsoring a resolution authorizing the municipal transportation agency to purchase 45 40-foot diesel hybrid buses to replace buses that are past their useful life. also to authorize the mta to enter into a contract to rehabilitate up to 80 of its buses. muni has many challenges, as we all know. one of the greatest challenges is that we don't have enough vehicles, buses and light rail vehicles. and that many of the vehicles that muni does have require sitting work.

need to be rehabilitated. are not reliable. they break down and service suffers as a result. so when i first learned that muni wanted to purchase these new vehicles and rehabilitate others i was excited to hear it. i was proud to be able to sponsor this authorization. it will make muni more reliable, it will make service more dependable and increase the number of vehicles that are usable by the agency. colleagues, i ask for your support in this authorization. >> thank you, supervisor wiener for your opening comments to the mta, who is here. do you have any comments on this item? do you have a presentation for us? >> thank you. thanks to the committee. just make some brief

opening remarks to support what supervisor wiener said and here to ask any questions. i would just remind the committee, this is part of a focused effort to renew the fleet. it's -- our rubber tire fleet is a $1 billion asset, carries about 75% of riders. we are currently operating among the oldest and i will say well used fleets of any major urban system. a couple points to highlight in addition to what's been noted in the opening comments and by the budget report, number one, this is -- we are taking advantage of a competitively bid consortium to get these buses. one of the things that it has done, by joining the consortium it's allowed us to reduce the up-front engineering time and some of the processing time so that one of the things that i'm the most excited about,

with your approval and assuming we can go through the rest of the process successfully and get a notice to proceed in november, the entire 45 new buses will be brought in by july of 2013, so you will see new buses on the street very quickly. the other thing i would also point out is it is a -- another major step down the road both in increasing fuel efficiency and reducing emissions going to right now the hybrid technology. that is, again, something that we are pleased with with this procurement. so happy to have the opportunity to discuss this or answer any questions and appreciate your consideration. >> thank you very much. before we go to the budget analyst report i think on this issue there were some questions about the funding. it looks like the mta has primarily most of the money to complete the entire

amount, or to meet the $36.9 million, but it is a little short and in the process of identifying funds to get all the way there. i absolutely understand the need for the mta to be able to purchase and procure additional buses. i think in our district we have seen the impacts of not having enough buses run. sometimes seeing mis-runs associated with either buses breaking down or not having enough fleet. so i absolutely understand the importance for the entire system. one of the questions i did have, this might be appropriate to ask the controller's office, one of the ways around -- i think we do this pretty typically with other contracts, human services agency or dph, where we enter into multi-year, not to exceed contract levels, where that department may not have all the funding immediately but the controller's office actually has controls over making sure they don't spend the not-to-exceed if they don't have the funding. i think this is the situation where there is a not-to-exceed of $36.9

million, roughly. they are not all the way there but expect to be. can you explain a little about some of the controls that would be in place to ensure they have the funding and don't spend above what they have? >> absolutely. good morning, supervisors, ben rosenfield. controller. you described that exactly right, supervisor chu. the board will often prove authorization for a contract that extends, for example, over multiple years. the charter requires the controller's office to ensure the city departments can't encumber that contract until the board has additionally appropriated funds to support it. in the case of a multi-year contract authorization for example we only allow the department to encumber funds one fiscal year at a time as you appropriate funds to meet that contract. so that secondary control you are talking about does exist and we do administer it and would apply in this case. the board could approve the authorization that is requested here. we would only allow the department to encumber the piece of the contract for

which they had funds in hand and for which the board has approved an appropriation. to the extent additional appropriations become available, in essence it allows the mta to order the last items on the menu that would exist within the authorization you would have provided. >> thank you. so why don't we go to the budget analyst report. i believe the budget analyst had sort of a recommendation to amend the contract language, et cetera. i know there's been conversations with the budget analyst about whether this would be an appropriate way to make sure there were controls. if i can ask you to go through the report but also provide your opinion on that approach. >> vood morning, chair chu, members of the committee, supervisor wiener, i'm from the analyst's office. that's correct, we had recommended not to exceed in the amount of 36.9 to about 34.3 million, 2.6 million reduction. this was based on the

information and budget provided to us by mta, including the shortfall in terms of the budget. since then we have spoken to the controller's office and have been assured the controller would certify funds before they could be encumbered and spent against the contract. so recommending the approval of the contract at the full amount of $36 million we would consider to be a policy matter. >> that wouldn't be appropriated but still get the same control we are talking about? thank you. if we don't have comments, why don't we open this for public comment. are there members of the public who wish to speak on item one? seeing none, public comment is closed. colleagues, we have this item before us. i think given the fact the controller's does have control this is pretty typical for other department where is we have multi-year large contracts where full funding is not available immediately. the controller's office controls an makes sure the department does not spend what their appropriation

authority is. i would suggest that rather than reduce it down per the budget analyst's original recommendation, we just not accept the budget analyst recommendation and move forward with legislation as proposed. colleagues, any thoughts on that? [ indiscernible ] >> okay. if we have a motion to move the item forward. we've got a motion to send the item forward with recommendation as-is, without objection. >> thank you, colleagues. >> thank you. item two, please. >> item two is a resolution authorizing renewal license agreement for telecommunication agreement from american towers at 99moultrie. >> thank you. for this item we have john updike. >> good morning members of the committee. john updike, director of real estate . this item seeks approval of a renewal license agreement for telecommunications at

99 moultrie, in bernal heights, surrounded by the park. i have a location map on the overhead for you. more specifically, the actually facility itself. you can see the existing tower and associated building that houses the equipment that serves that tower. this was actually a city-owned facility, along with the park around it. until it was purchased by at&t in 1961 through a condemnation action against the city. the park still remains a city asset. there's easement rights through that park. as a park, that condemnation settlement in 1961, the city retained certain rights to limited number of pieces of equipment through the tower and adjacent building. if the city required additional pieces then we needed to execute a second ago agreement with ownership of the tower and pay market rate for that. since 1993, that, in fact,

has been the case. the city has had a separate license agreement in place for excess equipment, the tower and room serving the tower. since 2003 that has been an annual self-renewing license agreement. so it was originally approved by the board but had a clause that allowed it to self-renew unless either party decided to terminate. we felt that was a fairly risky position for the city, given we have critical communications equipment on this tower. having that be subject to a notice from landlord for removal, didn't seem to be the best practice. last year we have been negotiating this particular agreement, which is now before you. the key terms are the following. we gave it a term-certain. this takes us through may 31 of 2017. it includes two five-year options for renewal, at the city's discretion. it has a clear pricing schedule, so we will be

paying $2,100 per month inclusive of the utility cost. that increases at 4% against a base rate that is actually a portion. that is against a $1,400 a month base rate. the increase in the amount of allowed equipment under the lease lets us address not only our existing needs but also we've then been in touch with other departments as to anticipated needs. this takes care of, for instance, the sfmta's anticipated radio replacement project. we have the rights to place their necessary dishes and receivers, as well as the department of technology and other departments as well. we have a total of four departments within this facility. to give you a sense of the expansion of rights under that condemnation agreement, we have the right for five racks of equipment in the building and eight dishes. this agreement allows us to

have 15 dishes and antennas on the tower and 33 different transmitters and receivers, so we believe this does take care of our long-term needs. since we've been negotiating this and had a sense of what this pricing would be, the fiscal impact has been embedded in the adopted fiscal year 13 dem budget, so there is no future fiscal impact. we have addressed that in the adopted budget. happy to answer any questions you might have. >> thank you very much. supervisor avalos. >> thank you, chair chu. to clarify something in the resolution. you talked about it briefly. we have the base rent up through may 31st is $2,100 per month. then we talk about the cpi of 4%, on a base rent of 1,400. does that mean we take a

portion of 2100, that 4% or after next year june 1st going from $2,100 to $1,400 and applying the cpi? >> good question. yes, the 4% increase is calculated against a $1,400 base. so that is added to that to get us to 2,200 and change to get through the following year. >> thank you. for this item we did not have a budget analyst report because dollar amount or threshold wasn't met so i would like to open this for public comment. are there any members of the public to speak? seeing none, closed. do we have a motion to send that forward? we can do that without objection. thank you, item three? >> item three is resolution approving revision to america's cup disposition

and authorize procurement of insurance. >> thank you very much. for this item we do have mike martin. before that i just want to explain there's also an amendment that i would be asking the committee to entertain. the copy has been put before us. they are non substantive so they would not require a continuance but are fairly simple. on page six and seven, just specifies or clarifies online 13 changes definition of force ma joer * as to the provisions in security and 4.3 are hereby approved to provide clarifying language. on the page 6 also on lines 23 through 25, and on page seven lines one. simply adds additional language with regards to the type of reporting that is required. just clarifying that the port director, as well as the project managers report

any operating expenditures including draws upon cash collateral and specifies the fundraising does not appear to be on track to cover the city's cost operating expenses, that they work to provide a proposal for us to see cost savings measures to offset the shortfall. that is what i would ask the committee to consider. from what i understand these were provided to the budget analyst so the report reflects knowing these are part of what will be considered today. so that is it. generally this is a fairly simple resolution, though i think there may be o ther questions related. it is a resolution that approves revisions to the lease disposition agreement. changes definition of the force ma injury * if you pronounce it like that, disputes project delays not subject to liquidated damages. it is my understanding there is procurement for

delays due to weather and fire but not to labor disputes because that is not something available through insurance products. i think that is primarily because i think insurance companies believe labor disputes are things that the project sponsors have the ability to control for. so there is no insurance product for that. it also authorizes procurement of insurance policy worth about $1 million. of course it specifies the progress reports required from the ac project director, america's cup project director and port director. specifically quarterly reporting to the controller's office but also to the budget and finance committee of the board of supervisors of the acoc fundraising, then transfer infrastructure expenses in preparation for the event. city operating including draws on cash collateral and if acoc doesn't appear to be on track, raise sufficient payment for expenses, to provide proposalals on expense reductions in order to offset shortfalls.

these are primarily gist of what the changes would be in this resolution. i know mike is here to provide a presentation so if i could ask you to come on up. >> good morning, mike martin, i'm the america's cup project manager in office of workforce development. just had a few slides to do a brief overview of the item. i think the budget analyst has done a great job of summarizing a complex issue but i will try to distill a couple points. go through the time line. talk about structure of the new security proposal and talk about where acoc is in their fundraising.

just to start with the time line, in december of 2010 the city was selected as the host city and executed the host and venue agreement. the key provision in the agreement that sort of gave rise to the conversation we are having is requirement that acoc procure a security instrument in amount of $32 million to secure the city's performance of its obligations under the agreement, as well as acocs. as we reported to you in march when we cam forward for the approval of the america's cup items, we had looked closely at this $32 instrument requirement and saw the city's obligations and the acoc's obligation were so widespread from delivery of construction projects to fundraising and corporate sponsorships to actually delivering city services during the events that we were going to need to satisfy this requirement through a mix of instruments. two of the instruments we reported out were a cash

collateral escrow fund to pay for services that wouldn't necessarily be insurable on the public markets and also provide a deductible for any insurance policy that would be available to secure the other pieces of the obligation. so we moved from -- that included a delegation of authority with specific parameters so that people like the risk management office, the controller, director of the port would have specific finding to make before they could approve moving ahead with the lda. the disposition agreement. over the course of march through august we worked hard to negotiate the various provisions under the delegation received from the board. as we continue to engage with the insurance markets i think what chair chu mentioned earlier became clear certain aspects of the things is key to insure were not available in public insurance markets. in addition to those dialogues i think we also understood that structurally getting insurance for contract as

ours, fairly unique, would be a manuscript policy, a cut from whole cloth insurance instrument and have to be structured to basically secure what our contractual obligations and the penalties would be. alongside this i think we continue to refine the project plans and other things that moved forward in terms of planning out how 3032 appears would be used for team bases in 2012 as opposed to 2013. fire damage at pier 29 and other pieces worked into our work on the insurance product. we really tried to taylor that insurance product to the construction deliveries, because that was the most i think cost-effective use of that instrument and used the escrow account to basically fill in around that. i think those were productive because the event authority called out a few things that were very important to them in really realizing the vision for the america's cup village

at piers 27 and 29. i think the fire damage at 29 made fire a key issue. unusually severe weather and strikes, as mentioned earlier, were the three key issues that were excused under the original approved lda but that the event authorities thought were hugely important to their proposal. so we negotiated with them and said, look, because the lda was approved with these excuses we will have to go back and get approval from the board to change that but in return let's negotiate a targeted sort of security provisions that. is what we are presenting to you today. we signed the lda in august to basically set up all the other contractual relationships in time for the events but set out this needs to come back to the board for approval as something that needs to happen after that signing that would authorize these pieces. as noted in the budget analyst report and in the resolution, failure to approve these would give the authority the right to terminate. what we would like is work through the issues and hopefully move ahead with

an approval. the structure of the security is well laid out in the budget analyst report, as i mentioned. the primary pieces are twofold. first is amend excuses under force ma injury * as required, which requires subsequent board approval. we structured the potential security under this agreement to actually total amount of $9.8 million, down from the $32 million called out in the original host agreement. this is basically in what i would call three buckets. the first is a $2.4 million deposit as of january into a cash collateral account. the primary use would be to make sure construction deliveries of facilities to be used by america's cup can happen on time or we can find replacement space. we are looking closely. right now we are on time and on budget. if we fall off we hopefully look for ways to accelerate

to avoid further damages and really, you know, give the time needed to develop these areas for the uses that we are going to use them for. the second bucket is a new listing of up to five million in liquidated damages. this is a per day amount that starts march first at one and increases over time, reflective of the increased damage to the america's cup village and having to delay getting things up and going. the $5 million exposure, as noted in the resolution is something we proposed through help of risk management to address through procurement of insurance policy that covers a wide range of things not covered by traditional builder's risk policy and liquidated damages, including the two new force ma injury * that are no longer excuses, fire and weather. as noted before insurance isn't available for strikes against the project but we feel that is unlikely. like the schedule, we will keep a very close eye on that. the third bucket of

security is the potential replenishment of $2.4 million cash collateral. that is only if we depleted to deliver construction projects and then have to go and replenish it. that amount is supposed to be on deposit starting in july of next year and really is focused on delivery of city services. buses on the street, cops and emergency personnel on the street, a way that matches up with the need created by the influx of visitors and spectators. so our intention is to obviously manage without having to access this account. this becomes a backstop for those city costs should that be necessary. we have a funding source if it becomes an emerging situation. as noted in the budget analyst report, these security instruments, both insurance and also the cash collateral would be -- we propose them to be funded by the city through the existing appropriation and repaid through reimbursement relationship.

we recognize the quarterly reimbursement with acoc, but obviously we want to give sort of a snapshot of where we are now. a lot of the facts on this slide are in the budget analyst report butly run through them quickly. approximately $13 million in seats and pledges. acoc paid 6 million to city to reimburse our fiscal year 2011-12 costs. they have cash on hand and 2.2 in pledges beyond that that would be receivable through january 2014, which is sort of the end of their event fundraising window. i think what we are seeing -- what we saw in august was obviously an uptick in interest in terms of having this waterfront event. i think acoc did a terrific job to capitalize on that, bringing in forces to know what the cup is. a lot of things we have done to improve the event, from sustainability plan to beginnings of youth

involvement. we had a good youth day we'd like to improve on, going into next year. the other things i think make this a san francisco event that we can be proud of. they had $350 donors at the event august 23rd, hoping to reach a similar number of donors through a variety of different ways during this october's fleet week/america's cup sort of waterfront celebration. acoc is expanding beyond philanthropic to look at foundations. they have secured gifts from the san francisco foundation, along with a couple others. the steven bechtel is another. they are opening to local corporations, which may not be candidates for sort of the global sponsorship level of america's cup corporate partnership but would like to be good civic partners and a potential for us to engage and hopefully find additional financial support. based on the philanthropic piece, the most developed,

the acoc is projecting -- it has $10 million outstanding, projecting another $5 million with target in 5 million new gifts, conservatively 3 million would be a good outcome, dove tailing with the costs for the first half of this year. they are looking at year end of giving to be key. obviously that is the time when they do a lot of giving. hopefully the dove tail, followed by good followup will result in realization of more funds over the course of the next three months that. is my prepared remarks but i'm happy to answer questions about any of that. >> thank you. why don't we go to the budget analyst report. >> good morning, chair chu, members of the committee. as we say on page five of our report. i won't repeat too much of it. mr. martin had to say. is that this revised da, the one thing it does is

transfers responsibility for obtaining the security from the acoc to the city. he spelled out the exposure of the city there would be in terms of cash 2.4 million dollars that would need to be put into the cash collateral or escrow immediately that may or may not be used. also another $1 million the city would have to come up with in terms of paying the premium on the $5 million insurance policy that the organizing committee will obtain. these are in the budget, are general fund moneys and reimbursable by america's cup organizing committee. if the cash collateral were to be drawn down in case the city couldn't meet its obligations or if there were additional funds, the additional 2.4 million during the event, those moneys are supposed to be reimbursable by the america's cup organizing committee. but as we said in